Getting your head around financing your new home build can be tricky . So we've put together this quick and easy guide to help you understand the process.
ESTABLISH HOW MUCH YOU CAN BORROW
Talk to your bank or shop around to find out how much you can borrow based on your banks criteria. Most banks have online calculators at your disposal. Here are a few
Remember to get pre-approval before going anything further
Did you know? You could be eligible for a KiwiSaver HomeStart grant of up to $10,000 when building a new home. If you’re building a new home with someone else and they are also eligible, you could get up to $20,000 between you. Clickhere to see if you and the property might be eligible.
FIND YOUR SECTION
If your financial situation allows it, purchase your section, if your overall budget is a bit tighter, its best to establish the purchase price of the section and then engage a builder to give you a proposal to build a new home within your budget.
Your builder should be able to give you an accurate estimate to ensure you don't exceed your loan limit. Make sure your builder covers everything in their proposal.
At Supreme Build we present complete build packages from plans and consent through to carpets and hardware.
Tip: After establishing a cost for your section and new home, allow a contingency to be safe, This will cover you for any unforeseen costs or changes you want to make. 10% minimum is recommended. A lot of banks will require a contingency regardless
CHOOSE YOUR BUILDER
Take time when choosing a builder to construct your new home. Choosing the right builder can be the difference between a good or bad building experience. A builder who is a member of a reputable association such as the Registered Master Builders Association can be a good option.
If you haven’t already, engage your builder to draw up a proposal to build your new home. Some builders have a range of plans ready to choose from, others take a fresh approach and design from scratch. At Supreme Build we do both.
Your proposal should include a cost for the build, a plan or concept and a detailed specification list of what included the construction of your home.
MEETING YOUR BANKS REQUIREMeNtS
Most banks will require the following from you
- Sale and purchase agreement: You will need to provide a copy of the sale and purchase agreement for your section
- Proposal: A copy of your builder proposal
- Valuation: You will need to get a valuation for your proposed new home. Your valuer will ask for information on the section and for your builder proposal and plan.
Provided the figures stack up, your bank will confirm your finance.
Note: Alot of banks now require a full set of council consented plans before they fully approve your loan. Ask your bank in the beginning if this is the case. To get consent plans drawn and aprroved could cost you $5000-$15,000 so its important to get a detailed propsoal from your builder approved by your bank before commiting. Your registered Master Builder can provide a preliminary agreement to have this work completed, at Supreme Build we do not require any payment upfront, our design service is included in our contract price.Upon signing our agreement you will only pay if for what ever reason your new home does not go ahead.
BUILDING CONTRACT
Once your bank has confirmed your finance. You will need to get your builder to provide a building contract. It is recommended to have your lawyer look over the contract. Both you and your builder will sign the contract, your builder may ask for confirmation of finance before signing.
Once your bank is happy with the building contract and all other documents are in place you will be granted full approval for your new home loan and you will be required to pay your deposit.
Tip: There are many benefits when using a Registered Master Builder. One is that banks prefer you to use one as they are familiar with the Master Builder contract and documents. Some bank even require you to have a Master Builders 10 year Guarantee or similar warranty for added security.
PAYMENTS
Your building contract should include the payment terms of the build. Most commonly these will be staged or progress payments. At each milestone your builder will invoice you or direct to your finance professional, either way your finance professional will pay your builder directly.
Be prepared to give your bank plenty of notice when the completion of your new home is near. This will allow them to pay the final invoice on time so you can take possession of your new home hassle free.
We hope this article has been helpful to you, should you have any more questions please don't hesitate to contact us here at Supreme Build.
Disclaimer: This article is offered as a general guide only. The views and information expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any agency in New Zealand. Any person who relies upon any matter contained in this guide does so entirely at their own risk.
